A certificate of deposit (CD) issued in the U.S. market, typically in New York, by a branch of a foreign bank. |||Yankee CDs are negotiable instruments, and most have a minimum face value of $100,000.
A bond denominated in U.S. dollars that is publicly issued in the U.S. by foreign banks and corporations. According to the Securities Act of 1933, these bonds must first be registered with the Securities and Exchange Commission (SEC) before they can be sold. Yankee bonds are often issued in tranches and each offering can be as large as $1 billion. |||Due to the stringent regulations and standards that must be adhered to, it may take up to 14 weeks (or 3.5 months) for a Yankee bond to be offered to the public. Part of the process involves having debt-rating agencies evaluate the credit worthiness of the Yankee bond's underlying issuer.Foreign issuers tend to prefer issuing Yankee bonds when U.S. interest rates are low because this means lower interest payments for the foreign issuer.
The period of time in which temporary yield discrepancies between fixed income securities are adjusted. |||Investors typically take advantage of this period by participating in a bond or sector swap. For example, if an investor believes that the yield spread between two bonds is too wide, their investment would be moved from the higher yielding bond to the lower yielding bond. If the investor has guessed the expected workout period correctly, the investor will gain from the yield adjustment.
This phrase has several meanings. In a general sense, when the buyer of a promissory note or other negotiable instrument assumes the risk of default. Without recourse can also refer to a financing arrangement where the dealer's maximum possible liability is limited to warranties pertaining to the quality of an installment contract. |||Another meaning of this term applies in the secondary market. In this case, the seller of loans or securities is no longer required to indemnify the investor for any losses suffered. Without recourse also applies to asset-based lending agreements where the lender is prohibited from charging back unpaid invoices caused by the debtor's inability to pay.
A well known bond investment manager who is one of America's 400 richest people as of 2009. William Gross is the founder of Pacific Investment Management (PIMCO) and manages their total return fund as well as several other funds. His investment style focuses primarily on fixed-income securities. During the 2008 subprime crisis Gross made a handsome profit on positions in Fannie Mae and Freddie Mac after their ownership transfer to the government. |||An avid gambler and stamp collector, William forked over nearly $3 million to obtain a sheet of the famous 1918 "Inverted Jenny" stamps that have a biplane stamped upside down onto them. He also served in the navy and graduated from Duke University, to which he has since donated over $20 million.
The risk of experiencing an adverse shift in market interest rates associated with investing in a fixed income instrument. The risk is associated with either a flattening or steepening of the yield curve, which is a result of changing yields among comparable bonds with different maturities. When market yields change, this will impact the price of a fixed-income instrument. When market interest rates, or yields, increase, the price of a bond will decrease and vice versa. |||When the yield curve shifts, the price of the bond, which was initially priced based on the initial yield curve, will change in price. If the yield curve flattens, then the yield spread between long- and short-term interest rates narrows, and the price of the bond will change accordingly. If the bond is a short-term bond maturing in three years and the three-year yield decreases, the price of this bond will increase. If the yield curve steepens, this means that the spread between long- and short-term interest rates increases. Therefore, long-term bond prices will decrease relative to short-term bonds. Changes in the yield curve are based on bond risk premiums and expectations of future interest rates.
The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment. |||Yield burning is attempted in order to reduce the amount of tax that is incurred on fixed-income investments. However, this practice violates federal tax laws. It is not legally possible for an investor to earn a given yield on a fixed-income investment and use yield-burning activities to evade the full extent of the tax obligations incurred on that investment.
The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price. |||Generally speaking, bonds are callable over several years and are normally called at a slight premium.
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